Festive over-indulgence may contribute to 120,000 bankruptcies in 2008, according to a new study.

The Grant Thornton report said that a third of the 28,000 personal insolvencies in the first quarter of the year will be triggered by excessive spending over Christmas.

"Sadly, many individuals spend on credit cards at Christmas and pay no heed to the financial warning bells," said the head of Grant Thornton's personal insolvency practice Mike Gerrard.

"Come January, they find themselves in a situation where previous financial woes are compounded by the bills arriving from the festive season, and in these situations insolvency becomes the only way out.

" Grant Thornton, one of Britain’s top insolvency practices, said that fewer people would go bankrupt in the first quarter of 2008 than last year.

However, it expects the number of personal insolvencies to rise above the 110,000 of 2007 due to a downturn in the housing market , a higher cost of living, and banks increased reluctance to lend.